What are the three variables that we use to determine ones social class?

Factors that Determine Economical Growth and Development of a Country!

The process of economic growth is a highly circuitous phenomenon and is influenced by numerous and varied factors such equally economic, political, social and cultural factors. It is believed by some economists that the capital is the just requirement for growth and therefore the greatest emphasis is laid on capital formation to bring virtually economic development. Only this is wrong. As Professor Nurkse rightly remarks, "Economic development has much to do with human en­dowments, social attitudes, political weather condition and historical accidents. Capital is a necessary but not a sufficient status of progress."

The following are diverse factors which make up one's mind economic growth and evolution:

(i) Supply of Natural Resources;

(ii) Capital course action which depends upon the rate of domestic saving and investment and inflow of foreign capital;

(3) Growth of population;

(iv) Technological Progress; and We examine below each of these factors in plough.

(i) Supply of Natural Resources:

The quantity and quality of natural resources play a vital role in the economic development of a land. Important natural resources are land, minerals and oil resource, water, forests, climate, etc. The quality of natural resources bachelor in a land puts a limit on the level of output of goods which can be attained.

Without a minimum of natural resources there is not much hope for economical development. Information technology should, even so, exist noted that resource availability is not a necessary condition for economic growth. For example, Bharat, though rich in natural resources, has re­mained poor and under-adult.

This is because resources accept not been fully utilised for productive purposes. Thus it is non only the availability of natural resources but as well the ability to bring them into utilise which determines the growth of an economy. On the other paw, Japan has a relatively few natural resources only has shown a very high rate of economic growth and as a result has become 1 of the richest countries in the world.

How has Japan done this phenomenon? It is international merchandise that has made possible for Japan to achieve college growth rate. Nihon imports many of natural resources such as mineral oil it requires for product of manu­factured appurtenances. It then exports manufactured goods to the countries that are rich in natural resources. Thus experience of Japan shows that abundant natural resources are non a necessary condition for economic growth.

Supplies of natural resources tin be increased as a result of new discoveries of resources within a land or technological changes which facilitate discoveries or transform certain pre­viously useless materials into highly useful ones. It should also be noted that the scarcity of sure natural resources can exist overcome by synthetic substitutes.

For instance, the synthetic rubber is being increasingly used in the place of natural safety in avant-garde countries. Further, nylon which is a synthetic substance is beingness largely used in identify of silk which is a natural substance. The utilize of natural resources and the role they play in the economic growth depend, among other things, on the type of technology. The relationship of resources to the kind and level of technology is very intimate.

One does not accept to become back very far in history to find when an item currently as valuable equally petroleum was of petty or no significance. Information technology is only recently that the various radioactive elements have come to be regarded as valuable. In many developing economies at that place are, no doubt, deposits of many minerals that are not being used because of technological deficiencies.

(ii) Capital Formation :

Labour is combined with capital to produce appurtenances and services. Workers need machines, tools and factories to piece of work. In fact the use of capital makes workers more productive. Setting upwards of more factories equipped with machines and tools which raise the productive capacity of the economy.

Therefore, in the opinion of many economists, capital formation is the very cadre of economic development. Whatever the type of economical system, without majuscule accumulation the process of economic growth cannot exist accelerated.

Levels of productivity in the United States of America are very high mainly considering American people work with more and better type of uppercase goods congenital up over the final several years. Low productivity and poverty of developing countries is largely due to the scarcity or shortage of existent concrete capital letter in these countries.

Economical growth cannot be speeded up without accumulating various types of capital goods, that is, without building factories, machines, tools, dams, bridges, roads, railways, ports, ships, irrigation works, fertilizers, etc., much economic development is not possible.

But capital germination requires saving, that is, the sacrifice of some current consumption. An increase in supplies of capital appurtenances can simply result from investment, and investment in plow is simply possible if a portion of current income is saved. Thus saving is essential to economic growth.

According to Professor Arthur Lewis, "The central problem in the theory of economic growth is to sympathise the procedure by which a community is converted from existence a five per cent saver to a 12 per cent saver with all the changes in attitudes, in institutions and in techniques which accompany this conversion Underdeveloped economies more often than not save very footling; not more 5 per cent of their national income.

For instance, saving in India on the eve of independence was nearly 6 per cent of the national income. On the other hand, rich countries save from fifteen to 30 per cent of their national income. In society to bring about economical growth, rate of savings must be stepped up to over 15 per cent of national income.

But in developing countries, the charge per unit of saving is low considering income of the people is low and that they are living at the level of subsistence. Thus, the lower the per capita income, the more difficult information technology is to forgo current consumption. It is difficult for people living at or near subsistence level to curtail electric current consumption. This in large role explains the depression level of saving in the poor, underdeveloped countries.

It may be noted that gross saving charge per unit in India has at present risen to 24 per cent of national income in 2001-02. However, for achieving 8 per cent rate of growth in GNP in the tenth plan period, information technology is estimated that 32 per cent charge per unit of saving is needed if capital letter-output ratio remains constant at 4 which was actually obtained in the 9th plan menses.

It must be emphasized, however, that savings in itself do not contribute to economic growth. It is but when savings are invested and used productively that they contribute to economic growth. If savings are hoarded in the form of gold or precious jewels, or if they are used for buying land, they do not outcome in an increase in supplies of capital appurtenances and thus make no contribution to economic growth.

Studies conducted to examine the relationship betwixt invest­ment and growth in terms of increment in GDP has found that in that location exists a strong correlation between the two though information technology is not perfect. Countries that classify a larger fraction of their GDP to investment such as Japan and Singapore accomplished high growth rates, and countries that classify a small share of Gross domestic product to investment such as Bangladesh and Nepal have low growth rates.

Foreign Capital: Foreign Aid and Foreign Investment :

As domestic savings are not sufficient to make possible the necessary or desired accumu­lation of capital letter goods, borrowing from abroad may play an important role. Professor A.J. Brown rightly says that "Evolution demands that people somewhere should refrain from spending part of their incomes, thus assuasive part of the world's productive resources to be used for aggregating of capital goods. The people who tin can best afford to practice this are generally those who live in countries of loftier average income. On the other hand, the countries where devel­opment is likely to convalesce suffering and promote welfare to the greatest extent are those where average incomes are low. There is a strong general example for the rich countries lending to the poor ones."

Nearly every developed state obtained the foreign assistance to supplement its own small saving during the early stages of its development. England borrowed from The netherlands in the seventeenth and eighteenth centuries, and in plow came to lend to nigh every other country in the world in the nineteenth and twentieth century's.

The Us, at present the richest country in the world, borrowed heavily in the nineteenth century, and has now emerged equally the major lender country of the twentieth century which is assisting the poor countries in their attempts to bring nearly economical growth.

It should exist noted that foreign capital does non flow into the developing countries in the form of aid alone (that is, loans at concessional rates of interest) simply too through straight in­vestment past foreign companies. Foreign direct investment (FDI) is an of import mode for a country to accelerate its economic growth.

Though the strange companies send back profits earned, their investments in factories increase the rate of upper-case letter accumulation in the developing countries leading to a college rate of economical growth and higher productivity of labour. Besides, foreign direct investment enables the developing countries to learn the new advanced technolo­gies developed and used in the rich developed countries.

The importance of foreign capital is reinforced past the need of a developing country for foreign exchange to buy imports. A developing state has to import huge quantities of capital letter goods, technical know-how and essential raw-materials which are required for industrial growth and building up of infrastructure such every bit power projects, roads, irrigation facilities, ports and telecommunication.

For all these, foreign exchange is needed which can exist obtained if foreign rich countries lend it to developing economies or if strange companies make direct investment in the developing countries. If foreign assistance is non forthcoming in adequate quantity, then the developing countries will experience serious difficulties of balance of payments. In the ab­sence of sufficient borrowing from away, or direct strange investment, rapid economic devel­opment of the developing countries will plough their balance of payments seriously adverse.

Furthermore, developing countries suffer non only from a shortage of savings but besides from a lack of technical know-how, managerial power, etc. Foreign upper-case letter when it comes in the form of individual investment in developing countries by strange companies, peculiarly the multi­national corporations (MNCs) bring with it these complementary factors which are very essential for evolution.

Due to bad experience of the colonial rule in the past, the developing countries were more often than not against the foreign upper-case letter, especially confronting individual strange investment. However the fears of foreign investment and aid are at present no longer in that location.

Further, now multilateral strange assistance is available through World Bank and International Monetary Fund (IMF) which provide loans at concessional rates to the developing countries for accelerating growth. As far every bit individual foreign investment is concerned, the developing countries (including Prc and Bharat) are com­peting with each other to concenter private foreign investors.

In India, the Government has fix the target of achieving annual inflow of $x billion of foreign direct investment. It has now been realised that foreign investment will non but supplement domestic saving and thereby raise the rate of investment, bring better technology and managerial know-how but volition besides ease the problem of foreign exchange.

Through raising the rate of investment and providing foreign exchange resources, it volition not but increase output but volition also generate employment oppor­tunities. Besides, like the domestic investment, foreign investment also produces a multiplier outcome on output, income and employment in the developing countries.

In the terminal fifteen years, China'south very high rate of economical growth which is more often than not described equally "Chinese growth miracle" is due to higher inflow of foreign straight investment (FDI) as compared to India. Foreign direct investment flows to China grew from $3.5 billion from 1990 to $53 billion in 2002.

On the other manus, FDI flow to Republic of india was a low $0.iv billion in 1990 and rose to $5.5 billion in 2002. Further, FDI has contributed significantly to the rapid growth of Red china'south manufacturing exports. In Bharat by contrast FDI has been much less important in driving India's export growth, except in information technology.

For higher strange directly investment flows to China Earth Investment Written report 2003 mentions among other things that Prc has more business-oriented and FDI-friendly attitudes, its FDI procedures are easier and decisions are taken rapidly.

Likewise, China has more flexible labour laws, a ameliorate labour climate and better entry and leave procedures for business. It is therefore not unexpected that People's republic of china has emerged at the top in attracting FDI flows. Against this, at present (i.e. in 2002) India is 15th in the World's FDI destination.

Human Uppercase: Education and Health :

Till recently economists have been considering concrete majuscule every bit the most important factor determining economic growth and accept been recommending that rate of concrete majuscule forma­tion in developing countries must be increased to advance the process of economical growth and raise the living standards of the people.

Simply in the last three decades of economic inquiry has revealed the importance of education equally a crucial gene in economic development, Education refers to the development of homo skills and knowledge of the labour strength.

Information technology is non only the quantitative expansion of educational opportunities simply also the qualitative improvement of the education which is imparted to the labour strength that holds the key to economic evolution. Because of its significant contribution to economic evolution, education has been called as homo uppercase and expenditure on instruction of the people as investment in man or human being capital.

Speaking of the importance of education or human capital. Prof. Harbison writes: "hu­human being resources plant the ultimate basis of production human beings are the active agents who accumulate capital letter, exploit natural resources, build social, economic and political organ­isations; and carry forrad national development. Clearly, a country which is unable to develop the skills and knowledge of its people and to utilize them effectively in the national economy will exist unable to develop anything else." Several empirical studies made in adult countries, especially the U.S.A. regarding the sources of growth or, in other words, contributions fabricated by various factors such equally physical capital, human-hours, (i.eastward., physical labour), education etc. have shown that education or the de­velopment of homo capital is a significant source of economic growth.

Professor Solow who was ane of the first economists to measure the contribution of man capital to economical growth estimated that for United States betwixt 1909 and 1949, 57.5 per cent of growth in output per man hr could be attributed to the residual factor which represents the event of technological change and of the improvement in the quality of labour mainly every bit a result of teaching.

Denision, another American economist made farther refinement in estimating the contribu­tion to economical growth of various factors. Denision tried to separate and measure out the contri­butions of various elements of 'rest factor'.

Denson's estimates for various sources of The states growth during 1929-82 are given in Table-one Every bit will be seen from the Table-ane Gross Domestic Product in The states grew at the rate of 2.ix per cent per annum over this period. The factors determining growth in this flow have been divided into two groups.

It will exist seen from the table, the growth in the quantity of labour accounted for 32 per cent of growth in GDP of the USA over this flow. The other grouping consists of various variables determining growth in labour productivity has been divided into five factors. Information technology is noteworthy that education per worker contributed xiv per cent to growth in output during this period technological change contributed 28 per cent to the growth in output.

Thus, growth in education per worker and technological alter together deemed for 42 per cent of growth in the output in the U.s.a. over this flow whereas capital letter formation contributed 19 per cent to the growth charge per unit. This shows the great importance of education and technological change as determinants of economic growth.

Another arroyo to mensurate the contribution of didactics is based upon the assay of the relationship between expenditure on education and income. Using this approach Schultz studied the relationship between expenditure on teaching and private income and also the relationship between expenditure on education and physical capital formation for the United States during the period 1900 to 1956.

He found that when measured in abiding dollars, "the resources allocated to education rose virtually iii and a one-half times (a) relative to consumer income in dollars, (b) relative to the gross germination of physical majuscule in dollars" This implies that the "income elasticity" of the demand for pedagogy was nigh 3.5 over the menses or, in other words, educational activity considered as an investment could be regarded as 3.v times more attrac­tive than investment in concrete capital. It may, however, be noted that these estimates of Schultz only indirectly reflect the contribution of educational activity to economic growth.

In our above assay nosotros have explained that instruction is regarded as investment and similar investment in concrete upper-case letter, it raises productivity of labour and thus contributes to growth of national income. Some economists have argued that education is of crucial importance not merely because education raises the productivity and therefore earnings of individual workers, simply it creates positive externalities, that is, benign external effects.

A positive externality occurs when the activity of a person provides benefits to others. For case, an educated person might generate new ideas which may lead to the improvement in methods of producing goods. When these ideas become a part of society'south pool of noesis (i.e. stock of human uppercase), everyone tin can utilize them and derive benefits from them.

These ideas are therefore external benefits of pedagogy. I problem facing the developing countries, particularly Republic of india is of brain bleed, that is, migration of a big number of highly educated persons (such equally those trained by IIT, IIM and medical colleges) to the developed countries such every bit USA to make higher earnings there. If pedagogy has positive external effects, so this encephalon drain will deprive the Indian economy of the beneficial effects which these educated people would have created here.

(iii) Technological Progress and Economic Growth:

Another important gene in economic growth is progress in technology, Employ of advanced techniques in product or progress in engineering brings about a meaning increase in per capita output. Technological advance refers to the discovery of new and better ways of doing things or an improvement in the sometime ways.

Sometimes technological advances result in an in­crease in available supplies of natural resources. But more generally technological advance re­sults in increasing the productivity or effectiveness with which natural resources, capital and labour are used and worked to produce goods. Equally a consequence of technological accelerate it becomes possible to produce more output with same resource or the aforementioned amount of product with less resources.

But the question arises as to how the technological progress takes place. The techno­logical progress takes identify through inventions and innovations. The discussion invention is used for the new scientific discoveries, whereas the innovations are said to have place only when the new scientific discoveries are used for actual product processes or commercial purposes. Some inventions may non be economically profitable to be used for actual production.

Information technology is quite well known that improvements in applied science greatly increment the effectiveness with which natural resource are used. In United States, for instance, increased used of mecha­nized power-driven farm equipment on land has greatly raised the agronomical productivity of land per hectare.

It may also be noted that some technological improvements take resulted in the increased effectiveness with which capital goods are used. But, as stated in a higher place, technological change more generally results in higher productivity of resources.

Technological change raises the productivity of workers through the provision of ameliorate machines, better methods and superior skills. By bringing about increase in productivity of resource the progress in technology makes information technology possible to produce more output with the same resources or the same amount of output with less resource.

Technical progress manifests itself in the change in product function. So a uncomplicated meas­ure of the technical progress would be the comparison of the position of production function at two points of fourth dimension. The technological alter may operate upon the production function through improvements of various sorts such as superior equipment, an improved material, and superior organisational efficiency.

Also, the technological progress may express itself in making available new products. It is now widely accepted that technological modify raises productivity and that a continuous technological change volition enable the economy to escape from existence driven to the stationary land or economic stagnation.

Classical economists like Ricardo and J.Southward. Factory expressed fear that the increase in the stock of majuscule will sooner or later, because of the performance of diminishing returns, land the economy into stationary state beyond which economic growth will come to an end.

Classical economists remained occupied with the idea of a sta­tionary state because they did not take into business relationship technological progress that could postpone the occurrence of a stationary land and ensure connected economical growth. Indeed, if techno­logical progress continuously takes place, demon of stationary country can be put off indefinitely.

It may exist noted that Adam Smith viewed technological progress as a rise in productivity of workers as a result of increment in division of labour and specialisation. The rise in productivity leads to the growth in national income. But information technology was J.A. Schumpeter who laid slap-up stress on the role of technological innovations in bringing about economical growth. He laid stress on the introduction of technical innovations in bringing about economic progress.

It is the entrepreneur who carries out the innovations and organises the production structure more than efficiently. Every bit, co-ordinate to Schumpeter, innovations occur in spurts rather than in a polish flow, economic progress is not a smooth and an uninterrupted process. The pace of economical progress is punc­tuated by the pace of innovations. Prof. Rostow proposed five stages in the development of an economy.

These stages are:

(i) Traditional lodge;

(ii) Preconditions for takeoff;

(iii) Accept-off into self-sustaining growth;

(four) Bulldoze to maturity and

(four) Phase of loftier mass consumption.

Information technology may exist noted that the economic transformation of the lodge from one stage to another involves, along with other things, a change in the level and character of technology. In the present age of greater specialisation it is the technology factor that underlies all major aspects of the modern productive apparatus such as decision making, product programming, skill requirements and market strategy.

Productivity of worker depends upon the quantity and quality of majuscule tools with which the labourers piece of work. For higher productivity the instruments of production have to be techno­logically more efficient and superior. The technological options open to an economy determine the input-mix of production. A commodity can exist produced past diverse technologies.

The quantity and quality of capital letter, skills and other factors required for production is directly dependent on the efficiency of the technique of production being used. Also, the managerial and organisational expertise has to exist in tune with the technological requirements of production. Viewed thus, engineering science in the present stage of economic development is an indispensable factor of produc­tion.

This is the age of engineering. The developing countries are obsessed by the want to make rapid progress in technology and then as to catch upwardly with the present-day developed countries. Strenu­ous efforts are being made to use improved technology in agronomics, industries, health, sani­tation, education and, in fact, in all walks of human life. Indeed, the newly emerging nations have come to regard technology as a breastwork of national autonomy and as a status symbol in the international community.

The procedure of technological progress is inseparably linked with the procedure of capital germination. In fact, both become hand in mitt. Technological progress is nearly impossible without capital germination. It is because the introduction of superior or more efficient techniques require edifice upward of new uppercase equipment which incorporates new applied science.

In other words, new and superior engineering science tin can contribute to national production and its growth if information technology is first embodied in the new capital equipment. The new majuscule investment has, therefore, been called the vehicle for the steady introduction of new engineering into the economic system.

The new inventions and innovations lead to new and more efficient techniques of produc­tion and new and meliorate products. Equally is well known, it is the inventions and innovations in cotton textile industry that led to the industrial revolution in England. In the olden times in­ventions were the work of some individuals and innovations were introduced into the production process past the private entrepreneurs.

Keeping in view the importance of technological progress in the economic growth of a country, the governments of various countries are spending a lot of coin on "inquiry and development" (R & D), which is carried on in diverse laboratories and institutes to promote technological progress.

Developing countries are using the technology imported from the adult countries be­cause they have not yet made sufficient progress in technology, nor have they adult to adequate extent capital goods industries which produce upper-case letter goods, embodying advanced tech­nology.

Simply false and utilize of the technology of the advanced countries past these under-de­veloped countries has produced one unfavourable result. It is that the applied science of the advanced countries is not in accordance with the factor endowments of these developing countries, since they have abundance of capital while the developing countries have surplus labour.

As a upshot of the apply of the majuscule-intensive engineering, enough employment opportunities take non been created by the large-scale industries using imported applied science. As a issue, unemployment in developing countries similar India has been increasing despite the progress in industrialisation of the economy.

In view of this not so happy experience in regard to the creation of employment opportunities by industrial growth, an eminent English economist, Prof. Schumacher has recom­mended the use of intermediate technology or what is likewise known as appropriate engineering science past the developing countries like India.

By Intermediate or appropriate technology is meant the technology which is labour-intensive and yet highly productive so that with its utilise plenty employment opportunities are created along with more production. Merely in order to notice out this appropriate technology for several industries, a adept deal of inquiry and development (R & D) activity is required to be carried out.

(iv) The Growth of Population :

The growth of population is another gene which determines the rate of economical growth. The growing population increases the level of output by increasing the number of working population or labour force provided all are absorbed in productive employment.

Nosotros saw to a higher place that according to estimates of Denison, increase in the quantity of labour contributed to the extent of 32 per cent to economic growth of output in the USA during 1929-1982. Moreover, the increase in population leads to the increase in demand for goods.

Thus, growing population means growing market for goods which facilitates the process of growth. When market for goods is enlarged, they tin be produced on a large scale and thus economies of large-scale product can be reaped. The economical history of U.S.A. and European countries shows that population growth contributed greatly to the increase in their national output.

But what has been true of U.s.a.A. and European countries may non exist true in case of the present-day developing countries. Whether or not the growth of population contributes to eco­nomic growth depends on the existing size of population; the available supplies of natural and capital resources, and the prevailing technology.

In the U.s., where supplies of natural and capital resources are insufficiently arable, the growth in population raises national output by increasing the quantity of labour. In India where supplies of other economic resources especially capital equipment, are relatively scarce, increment in population hinders economic growth instead of promoting it.

Labour is combined with capital to produce goods and services. Therefore, increase in the quantity of labour force will contribute to economical growth when the cooperating factor capital is also increasing. In the modern times workers need machines, tools and factories to work. Since a developing country such as Republic of india has a lot of surplus labour merely a small stock of capital letter, the workers cannot be productive if they are employed in some activities.

We thus see that a rapidly growing labour force past itself is no guarantee of economic growth. Increase in national output, that is, economic growth is possible only when the supplies of capital and other resources are increasing adequately along with the growth of labour force. If, on the other paw, when the supplies of capital letter and the other resource are meagre, the increase in the labour strength (or population) will merely add to unemployment and volition non bring about increment in national output.

As stated above, economic growth requires increasing supplies of capital appurtenances. Increasing supplies of capital goods become possible only with higher rate of investment. And a higher charge per unit of investment, in turn, is possible if rate of saving is loftier.

At present, increase in population past adding to number of mouths to be fed tends to raise consumption and, therefore, lowers both saving and investment. Thus rapid growth of population past causing lower rate of saving and investment tends to concur downwardly the rate of economical growth in developing countries. Thus, under conditions like those in Republic of india population growth actually impedes economic development rather than facilitates it.

It is worth noting here that changes in total GDP which are used to measure rate of economic growth are not a skillful mensurate of economical well-being. For the purpose of evaluating changes in economic well existence or living standards of the people of a state GDP per capita is more than important for information technology tells usa the amount of goods and services that is available for an individual in the economic system.

But how does growth in population or labour force bear upon GDP per capita? The reason is that quickly increasing labour forces the economy to spread more thinly the other cooperating factors, specially capital and land. As a event, capital or land per work declines causing decline in productivity of Gdp per worker.

Further, rapid population growth nullifies out efforts to raise the living standards of our people. In other words, a high rate of increase in population swallows up a large part of the increment in national income so that per capita income or living standard of the people does not ascent much.

This is precisely what has happened during the planning era in Bharat. This while the aggregate national income of India went upwards by 17.5 per cent in the commencement programme flow and 20 per cent in the second plan catamenia, per capita income rose past only eight per cent and 9 per cent respectively.

Over the period of the third program, as against an increase of eleven.v per cent in national income, per capita income improved by simply 0.v per cent. The relatively slow rate of rise in per capita income has been due to rapid population growth. The annual rate of population growth which was no more 1.86 per cent in the Beginning Programme menses went up to ii.15 per cent in the 2d plan flow and further to 2.25 per cent in the third and fourth plans.

Harrod-Domar Growth Equation: Rate of Investment and Uppercase-Output Ratio as Determinants of Growth :

Nosotros accept analysed above the diverse factors such as availability of natural resources, charge per unit of saving and capital formation, foreign capital, technological progress, increment in population which make up one's mind economic growth in a country.

These determinants of economic growth bear on (i) the rate of investment and (two) captia-output ratio. Therefore, the rate of economic growth, that is, increase in GNP depends upon the rate of investment and uppercase-output ratio. This fact is brought out by the growth models of Harrod and Domar.

According to Harrod-Domar growth models rate of economical growth is given by the following formula:

g= I/v

Where g stands for rate of growth (i.east., rate of increase in GNP)

I stands for rate of investment, and

five for upper-case letter-output ratio

The above equation can also be expressed in the post-obit form:

Rate of Growth = Rate of Investment/Capital – output Ratio

If in an economy rate of investment is 30% of national income and capital-output ratio is equal to 4, then from the above formula, we tin find out the rate of economical growth.

Charge per unit of Growth = 30/4 = 7.five

Therefore, the charge per unit of increase in GNP of national income will be 7.5 per cent per annum.

In the Tenth Five Yr Plan (2002-07) it has been planned that the charge per unit of investment will rising to 28 per cent of national income. Besides, through increase in efficiency capital-output ratio has been estimated to reject to three.5.

With 28 per cent of national income as charge per unit of investment and iii.5 as capital- output ratio, target charge per unit of growth during the Tenth Plan period has therefore been fixed at eight per cent per annum (Applying Harrod-Domar growth equation, namely, (1000 = 1/v = 28/3.v = 8% ). The experience of the last four years shows that both these targets of average charge per unit of investment of 28 per cent per annum during the 10th programme period and 3.five equally upper-case letter-output ratio will be accomplished.

As a matter of fact, on the footing of this Harrod-Domar growth model, it was suggested by several economists that in gild to achieve a higher rate of growth, the developing countries should get foreign aid and foreign direct Investment to supplement their domestic savings to enhance the rate of investment to the desired level.

In follows from above that in addition to rate of investment capital-output ratio is an important factor that determines rate of economic growth in the country. Requite the rate of investment, the lower the capital-output ratio the higher the rate of economic growth. Therefore, the written report of capital-output ratio at some length is called for.

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Source: https://www.yourarticlelibrary.com/economics/factors-that-determine-economic-growth-and-development-of-a-country/38250

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